A study by U.S. Bank found that 82% of the time, poor cash flow management or poor understanding of cash flow contributes to poor business management or even business failure.
During the coronavirus crisis, it’s more important than ever to stay on top of your cash flow. Here are the reasons you should pay attention to your cash flow to strengthen your business during the COVID-19 outbreak.
Importance of business cash flow
- Stability Cash on hand gives you better buying power and offers protection against loan defaults or foreclosures. Erratic or missed payments can cause your credit score to take a dive.
- Debt Payment When you borrow money to buy equipment, inventory and other items to run your business, you’re using future cash flow to make those purchases. You’ll need positive future cash flow to pay back that borrowed money. Defaulting on debts ruins your credit rating, making it hard to secure suppliers and low-cost financing.
- Securing a Low-Cost Loan In addition to running your business profitably, having sufficient cash flow is important if you’re seeking outside funds. Strong cash flow (along with a healthy credit score) generally means you’ll get better rates and terms.
Here are measures you can take during the coronavirus outbreak to stay above water until legislation passes to offer relief.
Know where you stand
Before you take measures to shore up cash flow, it’s important to know where you stand so you can track your progress. The SmartBiz Small Business Blog shows you how to calculate and offers free templates to help.
Reduce your overall expenses
Though there are necessary costs associated with running a business, it’s easy to fall into unnecessary debt obligations. If you anticipate cash flow issues, then it’s important to review your expenditures and eliminate those that aren’t absolutely necessary to operations. Similarly, a review of operations may also unlock opportunities to streamline procedures and cut costs.
Some business owners already operating on the bare necessities, budgeting and trimming expenses isn’t an option but here are some areas to review.
Review office supplies
Save money by cutting down on the cost of supplies like paper, printer ink, snacks, etc. Contract vendors to let them know you are price shopping. If they aren’t able to adjust, look for other resources. Large discount suppliers like Amazon or Wal-Mart may be able to lower your costs.
Lower overhead costs
Make sure you're getting the most out of your production space. Can you cut down the location where you produce your products? Leasing the space to another business is a strategy to explore. These days, other businesses might be looking for alternative spaces for offices or warehouses.
Examine insurance policies
Insurance policy costs can be a good place to save. Compare insurance providers for the most competitive rate. You can use those number to ask your current lender if they can match that rate. This is also a good time to review if you have the right policies in place. Check out these articles for more information:
- Types of Insurance Policies Every Business Needs
- Evaluating Insurance Needs | SmartBiz University
- What Home-Based Business Owners Need to Know About Insurance
Modernize marketing
Don't do away with paid advertising that is moving the needle. However, explore cheaper alternatives to get your brand out there like social media. For just a few dollars, you can target a specific audience by location, age, gender, and more.
For great social media ideas, visit the SmartBiz Small Business Blog:
- How to Quickly Master Social Media Marketing for Small Businesses
- How to Use Social Media Marketing Effectively
- How to Quickly Master Social Media Marketing for Small Businesses
Review the marketing materials you use as well. We’ve outlined low-investment ideas here: Best 5 Business Marketing Materials. Learn how your logo, business cards, and flyers can equal a good ROI.
Content marketing is a fast and easy way to introduce your brand and reinforce the product or services you offer.
Put strong time management strategies in place
Waste time, waste moneys. Optimize productivity to lower the cost of running your business day-to-day. It's easy to get distracted by the tidal wave of news in light of the coronavirus pandemic. Try to limit your exposure to specific times and turn off the TV when you’re done. Apps like Focus Booster or Rescue Time can help both you and your employees stay on task. Here’s a helpful article with tips you can easily put in place: 9 Tips to Improve Your Time Management Skills.
Embrace remote employees
If you work in a non-essential industry, you may be able to have your team work remotely from home as they shelter in place. Our comprehensive article, 12 Tips to Managing Remote Employees, shares actionable advice like setting work habit expectations and goals.
Final thoughts
It’s even more important now to keep up with breaking news. Stay on top of business restrictions and allowances, the progressing of the virus and how you can stay safe, and important legislation regarding emergency funding.
Bookmark the SmartBiz Coronavirus Resource Center for up-to-the-minute news about small business funding and strategies to keep your business afloat during these times: Small Business Loans & Resources in Times of Coronavirus (COVID-19).
